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Rules of Business Practice for the 2005–2010 USP Board of Trustees

16. Procedures for Indemnification of Trustees, Officers, Committee Members, Panelists, and Employees

16.01 Definition

For purposes of this indemnification policy, the terms "USP official" or "official" shall mean a current or former officer, member of the Board, Council of Experts or Expert Committee member, ad hoc Advisory Panel member, employee, or agent of USP.

16.02 Insurance

USP may purchase and maintain insurance on behalf of any person who is a USP official or who served as a USP official against any liability asserted against and incurred by such person in any capacity or arising out of such person's position, whether or not USP would have the power to indemnify the individual against liability under the following provisions of this Section 16.

16.03 Scope of Indemnification

  1. The organization may indemnify any USP official against reasonable expenses, judgments, fines, penalties and settlements actually incurred in connection with or arising out of any judicial , administrative, arbitration or other formal legal proceeding (Proceeding) by reason of the official's service on behalf of USP unless it is established that:
    1. the act or omission of the official was material to the matter giving rise to the Proceeding, occurred after March 17, 1993, and was committed in bad faith or was the result of negligence, willful misconduct, or active and deliberate dishonesty; or
    2. the official actually received an improper personal benefit in money, property, or services; or
    3. in the case of any criminal Proceeding, the official had reasonable cause to believe that the act or omission was unlawful.
  2. The termination of any Proceeding by judgment, order, or settlement does not create a presumption that the official did not meet the requisite standard of conduct set forth in subsection (a) above. The termination of any Proceeding by conviction, a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the official did not meet that standard of conduct.
  3. An official may not be indemnified in respect of any Proceeding charging improper personal benefit to the official, whether or not involving action in his or her official capacity, if the official is adjudged to be liable on the basis that personal benefit was improperly received.
  4. An official may not be indemnified in respect of any Proceeding by or in the right of USP if the result of the Proceeding is that the official is adjudged to be liable to USP.
  5. An official who has been successful, on the merits or otherwise, in the defense of any Proceeding relating to the official's acts or omissions on behalf of USP shall be indemnified against reasonable expenses incurred by the official in connection with the Proceeding.

16.04 Determination of Standard of Conduct

  1. Indemnification may not be made by the organization unless a determination has been made that the official has met the requisite standard of conduct set forth in Section 16.03(a).
  2. Such determination shall be made:
    1. By the Board, by a majority vote, or by a majority vote of a committee of the Board consisting solely of two or more members designated to act in such matter by a majority vote of the Board; or
    2. By special legal counsel selected by the Board or by a committee of the Board designated to make such selection under the same process set forth in subsection 1.
  3. Authorization of indemnification and determination as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, as described in subsection (b) above.
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    16.05 Reimbursement of Expenses

    1. Reasonable expenses incurred by an individual who is a party to a Proceeding or threatened Proceeding may be paid or reimbursed by USP in advance of the final disposition of the Proceeding, after a determination that the facts then known to those making the determination would not preclude indemnification under this section, upon receipt by USP of:
      1. a written affirmation by the official of the individual's good faith belief that the standard of conduct necessary for indemnification by USP as indicated in subsection 16.03(a) has been met; and
      2. a written undertaking by or on behalf of the official to repay the amount if it shall ultimately be determined that the standard of conduct has not been met; provided, however, that such undertaking shall be an unlimited general obligation of the official but need not be secured and may be accepted without reference to financial ability to make the repayment.
    2. Determinations and authorizations of payments under this paragraph shall be in the manner specified in section 16.04.
    3. This policy does not limit USP's power to pay or reimburse expenses incurred by an official in connection with an appearance as a witness in a Proceeding at a time when the official has not been made a named defendant or respondent in the Proceeding.

    16.06 Actions with Respect to Employee Plan

    Actions taken or omitted by a USP official as a trustee with respect to an employee benefit or welfare plan in the performance of the official's duties for a purpose reasonably believed by the official to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the organization.